Advanced
course « Economics of Inequality » (Master APE, M2 year)
Thomas Piketty
(EHESS,
Année universitaire/Academic year 2009-2010
Syllabus
(version 22/10/2009, TO BE
COMPLETED)
(relevant course material will be
made available on-line at least one week before each course)
Campus Paris-Jourdan, 48 boulevard Jourdan, 75014 Paris, salle E101 (pavillon E)
Tuesday 9h30-12h30
8 courses of 3-hour
each
29/9/2009, 6/10/2009,
13/10/2009, 20/10/2009, 27/10/2009, 3/11/2009, 10/11/2009
(no course on
17/11/2008 ; course 8 date yet to be set).
Email : piketty@ens.fr
Course web page : http://piketty.pse.ens.fr/fichiers/enseig/ecoineg/Syll2009-2010.htm
Le principal objectif de cours est de présenter des travaux récents portant sur l’économie des inégalités et de suggérer des pistes de recherches à des étudiants souhaitant travailler dans ce domaine. La question des inégalités sera envisagée à la fois d’un point de vue historique (comment les inégalités de revenus et de patrimoines ont-elles évolué depuis le 19ème siècle, et comment peut-on rendre compte de ces évolutions ?) et d’un point de vue théorique (modèles positifs de la dynamique des inégalités, théories normatives de la taxation et de la redistribution optimales, etc.). Une place importante sera également accordée aux évolutions les plus récentes et à leurs implications en termes de politiques économiques et sociales (quel sera l’impact de la crise actuelle sur la structure des inégalités ? comment se présente la question de la redistribution en ce début de 21ème siècle ?). Une participation active des étudiants est demandée. Les étudiants cherchant un sujet pour leur mémoire de M2 sont invités à consulter l’ensemble des thèmes mentionnés dans cette liste de lectures et dans les listes de lecture des années précédentes.
The main objective of this course is to present
recent research in the area of income and wealth distribution and to suggest
research topics to students wishing to work in this domain. The issue of
inequality will be treated both from an historical perspective (how did income
and wealth distributions evolve since the 19th century, and how can
we account for these changes?) and from a theoretical perspective (positive
models of income and wealth distribution dynamics, normative models of optimal
taxation and redistribution, etc.). The course will also address the most
recent evolutions and implications for economic and social policies (what will
be the impact of the current crisis on the structure of income and wealth
distributions? what are the prospects for redistribution in the early 21st
century?). An active participation of students is requited. Students looking
for a topic for their master dissertation are requested to examine all areas
covered in this syllabus, as well as in the syllabus of previous years
(available on-line).
Teaching language. The course will be bilingual. The
primary teaching language will be French. However (1) all teaching material –
course notes as well as research papers – will be in English, and is available
on-line, so that non-French speaking students can easily prepare courses and
questions ; (2) non-French-speaking
students are encouraged to ask as many questions in English as they want, and I
will always answer in English; in effect, if the demand for English – as measured
by the number and frequency of questions in English – is sufficiently strong,
the course will switch almost entirely to English; (3) in case there are
students whose understanding so French is so poor that the rules described
above turn out to be inadequate, the course will switch automatically to
English. The reasons for keeping French as the default language are threefold:
(1) it is much more fun for me to teach in French, and this is one of the good
things that convinced me to return to France; (2) my English is really bad, and
I think it is much more productive for French-speaking students to hear me
teach in French; (3) it cannot be that bad for non-French-speaking students to
learn a little bit of French by the end of the course.
Course validation. There will be no formal exam. In
order to validate the course, students are required (1) to attend and actively
participate to all classes; (2) to send me by email before 10/1/2009 a “referee
report” (2-5 pages) on a research paper chosen in this syllabus (or in the
syllabus of the previous years); the report must be written in English and must
provide a crystal-clear summary of the original contribution of the paper,
adequate references to the relevant literature, and an assessment of the
strength and weaknesses of the paper [exemples
of referee reports]
Course material. Some of the course material –
primarily course notes and selected tables and graphs extracted from key references
– will be distributed in hard copies during each class. This corresponds to
“HC” material in the following reading list. However most of the material will
not be distributed in hard copies and will solely be available in electronic
format on-line. Students are requested to read (and print if they so wish) this
supplementary material before the class. Two-star references ** are compulsory
reading. One-star references * are highly recommended. Other references provide
useful readings for students wishing to explore the specialized literature in
the relevant area, but will not be presented in a detailed manner during the
class.
A.B. Atkinson, The
economics of inequality, Clarendon Press, 1983
A.B. Atkinson et F.
Bourguignon (éd.), Handbook of Income Distribution, North-Holland, 2000
A.B. Atkinson et T. Piketty (éd.), Top incomes over
the twentieth century – A contrast between continental european and
english-speaking countries,
A.B. Atkinson et T. Piketty (éd.), Top incomes over
the twentieth century – A global perspective,
G.
Bertola, R. Foellmi & J. Zweimuller, Income distribution in
macroeconomic models, Princeton University Press, 2006
D. G. Champernowne and F. Cowell, Economic
Inequality and Income Distribution,
T. Piketty, L’économie des inégalités, éditions
T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001
B. Salanié, Théorie économique de la fiscalité, Economica, 2002
Part 1 : Income and Wealth
Distribution – Models and facts
** Course Notes A : Basic Models of Inequality – Capital vs Labor
[Course
Notes A (in html format)] HC
** National Income and Wealth Accounts
[Tableau économique
d'ensemble, TEE, France 2007 (in excel format)]
[Selected tables in pdf
format] HC
** Course Notes B : Capital share & wealth-income ratio –
Illustration using national accounts
[Course
Notes B (in html format)] HC
** Course Notes C : Models of Wealth Accumulation – Life-cycle vs
Dynastic Models
[Course
Notes C (in html format)] HC
(i) Modigliani-Kotlikoff-Summers controversy
on inheritance share in aggregate wealth
* Kotlikoff, L and L. Summers, “The Role of Intergenerational Transfers
in Aggregate Capital Accumulation”, Journal of Political Economy 89
(1981), 706-732 [article
in pdf format]
* F. Modigliani, “Life
Cycle, Individual Thrift and the Wealth of Nations”, American Economic
Review 1986 [article in pdf format]
Kotlikoff, “Intergenerational Transfers and Savings”, Journal of Economic Perspectives 1988 [article
in pdf format]
Modigliani, F. « The Role of Intergenerational Transfers and
Lifecyle Savings in the Accumulation of Wealth », Journal of Economic Perspectives 1988 [article
in pdf format]
(ii) Long-run changes in wealth concentration
and age-wealth profiles
** T. Piketty, G. Postel-Vinay et J.L.
Rosenthal, “Wealth Concentration in a Developping Economy: Paris and France,
1807-
[Selected
tables in pdf format] HC
** W. Kopczuk et E. Saez, « Top Wealth Shares in the United States,
1916-2000 – Evidence from Estate Tax Returns », National Tax
Journal 2004 [article
in pdf format]
[Selected
tables in pdf format] HC
* J. Roine and D. Waldenstrom, “Wealth Concentration over the Path of
Development:
[Selected
tables in pdf format] HC
(iv) Other recent
theoretical and empirical research on wealth distributions
* A. Atkinson, “Concentration Among the Rich”, mimeo, 2006 [article in
pdf format]
J. Benhabib and S. Zhu, “Age, Luck and
Inheritance”, mimeo 2008 [article
in pdf format]
A. Castaneda, J. Dias-Gimenes and V. Rioss-Rull, “Accounting for the
U.S. Earnings and Wealth Inequality”, Journal of Political Economy, 2003 [article in pdf format]
C. Caroll, “Why Do the Rich Save So Much?”, 2000 [article
in pdf format]
* J. Davies, S. Sandstrom, A. Shorrocks and E.
Wolff, “The World Distribution of Household Wealth”, mimeo 2006 [article
in pdf format]
M. Cagetti and M. DeNardi, “Wealth Inequality: Data and Models”, NBER
Working Paper 12550, 2006 [article
in pdf format]
W. Kopczuk, “Bequest and Tax Planning: Evidence from Estate Tax
Returns”, Quarterly Journal of Economics 2007 [article
in pdf format]
D. Krueger and A. Ludwig, “On the Consequences of Demographic Change for
Rates of Return to Capital, and the Distribution of Wealth and Welfare”, NBER
Working Paper 12453, 2006 [article
in pdf format]
D. Fiaschi et M. Marsili, « The Distribution of Wealth :
Theoretical Microfoundations and Emirical Evidence », mimeo 2007, [article
in pdf format]
Zucman, G., “Les hauts
patrimoines fuient-ils l’ISF? Une estimation sur la période 1995-2006 », [article in pdf format]
K. Dynan, J. Skinner, S. Zeldes, “Do the Rich Save
More?”, Journal of Political Economy 2004 [article
in pdf format]
K. Charles et
A. Bjorklund, J.
Roine, D. Waldenstrom, “Intergenerational income mobility in
(i)
Warning : be careful with data sources
Income and
wealth surveys (in
On French surveys (codebooks and files), see
Link toward Centre Maurice Halbwachs
Primary sources vs
secondary sources.
On the danger of
secondary data sets on inequality, see:
* A.B. Atkinson et A.
Brandolini, « Promise and Pitfalls in the Use of « Secondary »
Data-Sets : Income Inequality in OECD Countries as a Case Study », Journal
of Economic Literature 39 (September 2001), pp.771-799 [article in pdf format]
A. Banerjee et
K. Deininger et L.
Squire, « A New Data Set Measuring Income Inequality », World Bank
Economic Review 10 (3) (1996), pp.565-591 [Deininger-Squire
data set]
(ii) Sources and
methods to estimate top incomes: income tax tabulations and Pareto
interpolations
** Exemple of pre-electronic primary data source: tabulations based upon
French 1919 income tax returns
[tables
1919 (published in BSLC 1923) in pdf format] HC
** Course Notes D : Pareto
interpolation techniques for income and wealth distributions
[Course Notes D (in html format)]
HC
* T. Smeeding and J. Thompson, “Income from
Wealth and Income from Labor: Stocks, Flows, and More Complete Measures of
Well-Being”, mimeo 2006 [article
in pdf format]
(iii) Results on top income shares in the long run: the end of rentiers
(1914-1945), the rise of working rich (1979-2007)
** A.B. Atkinson, T. Piketty & E. Saez, “Top Incomes in the Long Run
of History”, NBER Working Paper n°15048 (2009) (paper prepared for Journal of
Economic Literature) [article
in pdf format]
[Selected tables in pdf format]
HC
Detailed cross-country studies:
A.B. Atkinson et T. Piketty (ed.), Top incomes over
the twentieth century - A contrast between continental european and
english-speaking countries,
A.B. Atkinson et T. Piketty (éd.), Top incomes over
the twentieth century – A global perspective,
T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001
** T. Piketty, « Income Inequality in
** T. Piketty et
See Emmanuel Saez’s web page
for updated series until 2007
** C. Landais, "Les hauts revenus en France (1998-2006): Une explosion des inégalités ?", Mimeo, Paris School of Economics, 2007 [article in pdf format]
[Selected
tables in pdf format] HC
(iv) What do we know about the rise of working rich & the top-end
labor market?
** R. Burckhauser, S. Feng, S. Jenkins, and J. Larrimore, “Recent Trends
in Top Income Shares in the
* S. Kaplan and J. Rauh, “Wall Street and
** M. Bertrand and S. Mullainathan, “Do CEOs Set Their
Own Pay ? The Ones Without Principals Do”, Quarterly Journal of
Economics 116 (3) (August 2001), pp.901-932 [article
in pdf format]
[selected
tables in pdf format] HC
* X. Gabaix and A.
Landier, “Why Has CEO Pay Increased so Much?”, Quarterly Journal of
Economics 2008 [article
in pdf format]
** C. Frydman and R. Molloy,
“Does Tax Policy Affect Executive Compensation? Evidence from Postwar Tax
Reforms”, mimeo, 2009 [article in pdf format]
* R. Gordon, “Misperceptions
about the Magnitude and Timing of Changes in American Income Inequality”, NBER
Working Paper 15351 (2009) [article in pdf format]
** J. Rotemberg, “Perceptions of Equity and the Distribution of Income”,
Journal of Labor Economics 2002 [article in pdf format]
Part
2 : Optimal redistributive taxation and other policy responses
Week 6: Optimal
redistributive taxation of labor income
(i) Observed patterns of marginal vs average tax rates on labor income
** Income tax schedule (France 2008)
[tax schedules in excel format] HC
(ii) Theoretical models of optimal labor income tax rates
** Course Notes E : Optimal
redistributive taxation of labor income
[Course Notes E (in html format)]
HC
Mirrlees, J.,
"An exploration in the theory of optimum income taxation", Review
of Economic Studies 38 (1971), 175-208.
P. Diamond, “Optimal
Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Rates”,
American Economic Review 88 (1998), 83-95 [article
en format pdf]
* E. Saez, “Using Elasticities to Derive Optimal Income Tax Rates”, Review
of Economic Studies 68 (1) (2001),
pp.205-229 [article
en format pdf]
T. Piketty, « La
redistribution fiscale face au chômage », Revue française d’économie
12 (1) (hiver 1997), pp.157-201 [article
en format pdf]
(iii) Empirical estimates of high-income labor supply elasticity
** E. Saez, J. Slemrod and S. Gierz, “The Elasticity
of Taxable Income with Respect to Marginal Tax Rates: A Critical Review”, NBER
Working Paper 15012 (2009) [article en format pdf]
* R. Chetty, “Is the Taxable Income Elasticity
Sufficient To Calculate Deadweight Loss? The implications of evasion and
avoidance”, AER 2009 [article en format
pdf]
** M. Feldstein, “The Effect of Marginal Tax
Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act”, Journal
of Political Economy 103 (1995), 551-572 [article
en format pdf]
[selected
tables in pdf format] HC
A. Goolsbee, “What Happens When You
Tax the Rich? Evidence from Executive Compensation”, Journal of Political
Economy (April 2000) [article
en format pdf]
A. Goolsbee, “Evidence on the High-Income Laffer Curve from Six Decades
of Tax Reform”, Brookings Papers on Economic Activity 1999:2.
R.H. Gordon et J. Slemrod, “Are
“Real” Responses to Taxes Simply Income Shifting Between Corporate and Personal
Tax Bases?”, in Does
Atlas Shrug? – The Economic Consequences of Taxing the Rich, édité par J.B.
Slemrod, Harvard University Press, 2000 [article
en format pdf]
J. Gruber et
* T. Piketty, “Les hauts
revenus face aux modifications des taux marginaux supérieurs de l’impôt sur le
revenu en France, 1970-
E. Saez, “Reported Incomes and Marginal Tax Rates, 1960-2000 :
Evidence and Policy Implications”, mimeo,
(iv) Empirical estimates of low-income labor supply elasticities
* B. Dormont, D. Fougère et
A. Prieto, « L’effet de l’allocation unique dégressive sur la reprise
d’emploi », mimeo, CREST, 2001 [article
en format pdf]
* B. Meyer et D. Rosenbaulm, « Welfare, the Earned Income Tax
Credit, and the Labor Supply of Single Mothers », Quarterly Journal of
Economics 116 (3) (August 2001), pp.1063-1114 [article
en format pdf]
* T. Piketty, “L’impact de
l’allocation parentale d’éducation sur l’activité féminine et la fécondité,
1982-
[selected tables in pdf format]
(iv) Empirical estimates of labor demand elasticities
D. Acemoglu at J. Angrist, “Consequences of Employment Protection? The
Case of the Americans with Disabilities Act”, Journal of Political Economy
109(5) (2001), pp.915-957 [article
en format pdf]
J. Gruber, “The Incidence of Mandated Maternity Benefits”, American
Economic Review 84(3) (1994), pp.622-641 [article
en format pdf]
F. Kramarz et T. Philippon, « The Impact of Differential Payroll
Tax Subsidies on Minimum Wage Employment », Journal of Public Economics
82 (1) (October 2001), pp.115-146 [article
en format pdf]
K. Lang, “The Effect of Payroll Tax on Earnings: A Test of Competing
Models of Wage Determination”, NBER Working Paper 9537 (2003) [article
en format pdf]
Weeks 7 & 8:
Optimal redistributive taxation of capital and capital income
(i) Overview of the various types of capital and capital income taxes
** Tax schedules for Wealth Tax (ISF) and
Estate tax (France 2008)
[tax schedules in excel format] HC
** T.
Piketty et E. Saez, « How progressive is the
[selected tables in pdf format] HC
** T. Piketty, « Wealth taxation in the
21st century: a personal view », In : Reforming the Tax System for
the 21st Century: The Mirrlees Review,
A. Auerbach, « The Future of Capital Taxation », mimeo,
2006 [article
in pdf format]
(ii) Basic theoretical result 1: without inheritance, and with perfect
capital markets, optimal k tax = 0%
Intuition: if 100% of capital accumulation comes from lifecycle savings,
then taxing capital or capital income is equivalent to using differential
commodity taxation (current consumption vs future consumption);
Atkinson-Stiglitz: under fairly general conditions (separable preferences),
differential commodity taxation is undesirable, and the optimal tax structure
should rely entirely on direct taxation
(to put it differently: if inequality entirely comes from labor income
inequality, then it is useless to tax capital; one should rely entirely on the
redistributive taxation of labor income)
Papers on optimal indirect taxation:
A.B. Atkinson and J. Stiglitz, “The design of tax structure: direct vs
indirect taxation”, Journal of Public Economics 6 (1976), 55-75
V.
Christiansen, « Which Commodity Taxes Should Supplement the Income
Tax ? », Journal of Public Economics 1984 [article
en format pdf]
(iii) Basic theoretical result 2: with infinite-horizon dynasties,
optimal linear k tax = 0%, but optimal progressive k tax > 0%
** Course Notes F : Optimal
redistributive taxation of capital and capital income
[Course Notes F (in html format)]
HC
R. Lucas,
“Supply Side Economics: An Analytical Review”, Oxford Economic Papers
1990 [article
in pdf format]
(iv) Basic result 3: with imperfect k markets, optimal k tax > 0%
C. Chamley, “Capital Income Taxation, Wealth Distribution and Borrowing
Constraints”, Journal of Public Economics 79 (1) (January 2001),
pp.55-70 [article
en format pdf]
* J. Conesa, S. Kitao and D. Krueger, “Taxing Capital? Not a Bad Idea
After All!”, American Economic Review 2009 [article en format pdf]
(v) Other recent papers on
capital taxation
On capital taxation and governance:
M. Desai, A. Dyck, L. Zingales, « Theft and Taxes », Journal
of Financial Economics, 2006 [article
in pdf format]
R. Morck, “Why Some Double Taxation Might Make Sense: The Special Case
of Inter-Corporate Dividends”, NBER Working Paper 9651 (2003) [article
in pdf format]
R. Morck and B. Yeung, “Dividend Taxation and Corporate Governance”, Journal
of Economic Perspectives 2005 [article
in pdf format]
W. Kopczuk and J. Slemrod, “Putting Firms into Optimal Tax Theory”, American
Economic Review 2006 [article in pdf format]
On informational rationales for taxing capital income:
H. Cremer, P. Pestieau et J.C. Rochet, “Capital Income Taxation when
Inherited Wealth is Not Observable”, Journal of Public Economics 87
(2003), 2475-2490 [article
en format pdf]
R. Gordon, « Taxation of Interest Income », NBER Working Paper
9503 (2003) [article
en format pdf]
On private vs social discounting and negative capital taxation:
E. Farhi and I. Werning, “Progressive Estate Taxation”, mimeo 2008 [article
in pdf format]
(vi) Family wealth transmission and economic efficiency
** M. Bennedsen, F. Peres-Gonzalez, K. Nielsen and D. Wolfenzon, “Inside
the Family Firm: The Role of Families in Succession Decisions and Performance”,
Quartely Journal of Economics 2007
[article
in pdf format]
[selected
tables in pdf format] HC
* J. Brown, C. Coile, and S. Weisbenner, “The Effect of Inheritance
Receipt on Retirement”, NBER Working Paper 12386, 2006 [article
en format pdf]
F. Caselli et
D. Holtz-Eakin, D. Joulfaian et H.S. Rosen, « The Carnegie
conjecture : some empirical evidence », Quarterly Journal of
Economics 108 (May 1993), pp.288-307 [article
en format pdf]
R.K. Morck, D.A. Strangeland et B. Yeung, « Inherited Wealth,
Corporate Control and Economic Growth: the Canadian Desease? », in R.K.
Morck, Concentrated Capital Ownership, NBER/University of
* F. Pérez-Gonzalez, “Inherited Control and Firms’ Performance”, American
Economic Review, 2006 [article
in pdf format]
* L. Bach, “Family CEO Successions and Firms
Brankruptcies – Evidence from
* V. Grossmann and H. Strulik, “Should
Continued Family Firms Face Lower Taxes Than Other Estates?”, mimeo 2008 [article in pdf format]